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The Sequester

The+Sequester

Josh White – Accounting Student

The sequester which was passed in March which created automatic budget cuts across the board to help balance the government’s budget. This plan which went into effect will cut the budget by $85.4 billion for the 2013-2014 fiscal year and will save the government over $995 billion if it stayed in effect between the 2014-2023 years. It is also believed that it will decrease the 2013 economic growth from 2% to 1.4% and will affect the creation or retention of over 750,000 jobs. These budget cuts will reduce funding in nearly all aspects of the government and could cause many jobs to be cut or wages/hours lowered. The defense budget will be cut by $42.7 billion in 2013 and will fall by another $34.2 billion in the 2014 fiscal year. Medicare spending will also be affected falling at a rate of about 2% per year. However it is still believed that it will rise from $551 billion in 2013 to $1,079 billion by 2023 which is 6.3% yearly growth rate. Many economists are worried that the sequester will harm the recovery by slowing it down. They also suggested that smaller budget cuts which could lead later into larger cuts would be more beneficial to the economy. Also under these new sequestration cuts funding for research and development would be cut from 5.1% to 7.3% with an estimated cut of $200 billion from the $565 billion that it was at previously. Both spectrums of the political parties are blaming each other for the sequester. The Democrats are blaming the Republicans for failing to stop the automatic budget cuts from taking place. On the other side the Republicans are blaming the Democrats for trying to force an increase in taxes. Both sides do agree that these cuts will be felt eventually if not immediately by the people of America. Official say that these cuts will be felt over the new several months and will build over time calling the effect it will have a “tumble downward”. Some believe that this will have some positive effects such as forcing the government to trim the budget and get rid of costly unnecessary things that are included in the budget. However David Walker a former U.S. comptroller general said that the cuts will not nearly be as bad as estimated and that it is mostly just hype. He says that we spend as much money as the next fifteen countries put together and the cuts will not be nearly as bad as believed. Congress has been given only two months to try to come up with a debt limit. They have even suspended the $16.4 trillion debt limit until May 18, then on May 19, they will raise the debt limit to whatever they have accumulated during that time. The extension approved in January allowed a $450 billion increase in borrowing before the debt limit will be reached. Even after May 18, if no budget is reached they could again push the decision back to July or even August by bringing back $220 billion in borrowing abilities.

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